Scenario 16-6 Ike's Ice Cream has decided to open a new ice cream parlor in Mayville, MS. The market for ice cream parlors is monopolistically competitive.Refer to Scenario 16-6. As a result of the new Ike's Ice Cream parlor, existing ice cream shops located in Mayville are likely to experience aA. product-variety externality, which benefits consumers.B. product-variety externality, which harms consumers.OC. business-stealing externality, which harms producers.D. business-stealing externality, which benefits producers.

Monopolistic competition involves many firms offering differentiated products, engaging in non-price…

Answered: Scenario 16-6 Ike's Ice Cream has…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter14: Monopolistic Competition And Product Differentiation

Section: Chapter Questions

Problem 10P

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Figure#4: Price and cost (dollars per client) 100.00 90.00 80.00 MC ATC 70.00 60.00 50.00 40.00 30.00 20.00 10.00 MR 8 10 Quantity (clients per day) Refer to Figure#4. This figure depicts a situation in a monopolistically competitive market. In short run, how much output will the monopolistic competition produce and will charge at what price?
The diagram below describes a monopolistically competitive firm in long-run equilibrium. On the diagram illustrate. a. The quantity of output, qo , that maximizes profit. b. The quantity of output, qfe , that would represent the firm’s full capacity. c. The quantity of output, qs , that would represent the socially optimal output level.
Fresh Taste, Inc. produces organic breakfast cereals. The market for breakfast cereals is monopolistically competitive. The figure above shows the demand curve that Fresh Taste faces (D), the company's marginal revenue curve (MR), its marginal cost curve (MC), and its average total cost curve (ATC). Fresh Taste's excess capacity is a. 4,000 boxes per day. b. zero. c. 12,000 boxes per day. d. 8,000 boxes per day.
GoGo Pizza is producing at the profit-maximizing level of output in a monopolistically competitive market. i. Show GoGo Pizza’s profit-maximizing level of output, selling price, and a positive profit in a diagram. Briefly explain. ii. Does GoGo Pizza have an incentive to produce at the level of output that maximizes the social welfare? Explain with the diagram in part (i).
Exercise A.8. The graph below corresponds to a company operating in a market under conditions of monopolistic competition: € 5 4 3 2 1 CM CMe 20 40 60 90 100 120 Quantity of output a) What is the level of production maximizes the short-term profits of this company? b) What price will the company charge to maximize its profits? c) What benefits does the company obtain in the short term? d) How would advertising affect the curves shown in the graph? Would profits necessarily increase? Reason your answers.
In the graphs below, which one best describes the short-run equilibrium, and which one best describes the long-run equilibrium in a monopolistically competitive market? a) the graph on the left shows the short-run, the graph on the right is the long-run equilibrium. b) the graph on the left shows the long-run while the graph on the right shows the short-run equilibrium. c.) neither graph shows a monopolistic competitive firm
A small, local restaurant in St. Augustine, FL, serves scrambled eggs for breakfast. The market for breakfast scrambled eggs is monopolistically competitive. The following graph shows the demand, MR, MC, and ATC curve of this local restaurant. Use the graph to answer questions 3 to 7. Price (P) per plate $10 7 5 3 2 0 MC MR 50 80 100 ATC Number of plates of scrambled eggs served per day (Q)
Suppose the figure to the right represents the market for a particular brand of shampoo, such as L'Oreal, Lancome, or Maybelline. Assume the market is monopolistically competitive and is in long-run equilibrium. How much excess capacity does the firm have? The monopolistically competitive firm's excess capacity is thousand bottles of shampoo. (Enter your response as an integer.) C Price and cost (per bottle) 2.00- Q 1.80- MC Q ATC 1.60- 1.40- 1.20- 1.00- 0.80- 0.60- 0.40- 0.20- 0.00+ 0 2 MR D 4 6 8 10 12 14 16 18 20 Quantity (shampoo bottles in thousands)
FIGURE 10-1 Price MC ATC AVC D MR Quantity The profit-maximizing firm illustrated in Figure 10-1 operates in a monopolistically competitive industry. Which of the following best explains what happens in the long run? New firms enter the industry and the firm's marginal cost curve shifts up, which leads to a decrease in the firm's O output. New firms want to enter the market but CANNOT since there are barriers to entry in monopolistic competition. The market supply curve shifts right, reducing the equilibrium market price. New firms enter the industry and the firm's demand curve shifts left and becomes more elastic.
The mobile phone industry is monopolistically competitive, and is described by Diagram A and Diagram B above. Samsung pursued a successful differentiation strategy and, as a result, is making a positive economic profit in the short run. A: Identify the area that represents consumer surplus. B: Explain how the other firms producing mobile phones would react to Samsung’s short-run positive economic profit. What would be the long-run impact on Samsung’s output, price and profit? C: In the long run, Samsung is inefficient and has excess capacity. Identify the inefficiency and excess capacity on the long-run diagram and explain why they occur.
A monopolistically competitive industry exists in both Pugelovia and the rest of the world, but there has been no trade in this type of product. Trade in this type of product is now opened. a. Explain how opening trade affects domestic consumers of this type of product in Pugelovia.
The graph below shows the demand curve for a perfectly competitive firm. Suppose that firms in this industry discover a way to differentiate their products. Using the line drawing tool, show how the firm's demand curve would be likely to change. Label the new demand curve 'd,'. Carefully follow the instructions above, and only draw the required objects. Since the demand curve is downward sloping, the monopolistically competitive firm will set a price OA. that is less than marginal cost. B. that is unrelated to marginal cost. OC. that is equal to marginal cost. D. that is greater than marginal cost. Price 10- Q Q Output 10

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